Would you marry your spouse if you didn't know about their financials
Serious Question: Â Would you marry your spouse if you didn't know about their financial well being? Â If you didn't know whether or not they were in debt? Â If you didn't know whether or not they had a savings account in case *something* happened? Â The answer, likely, is no. Â Why? Â Because you want to know what you're getting into. Â Totally normal. Â Because you want to make sure they won't be spending a ton out of your own pocket to support someone who is having serious financial difficulties (unless that's your thing-in which case contact me because I can play matchmaker). Â In any event, you likely realize, at one time or another, that knowing what you're getting into, financially speaking, is incredibly important when you're about to commit to something. Â Which brings me-obviously- to the co-op.
The Market is hot again, folks. Â People buying and getting involved in bidding wars in the same way that they did in 2006 (you remember 2006, right?) Â Anyway, what I'm finding more and more when I represent purchasers is this kind of "whatever" attitude on the part of co-ops when disclosing or discussing their financials. Â You see, when you buy a co-op, you're actually buying shares in a company. Â And, like marriage, or a company you're investing in, you want to know the condition of the investment at the time you go in. Â The financials of the co-op are just that. Â They tell you whether or not the co-op is in good health, financially speaking. Â If the co-op is showing year over year deficits, that means something's not right. Â If the co-op;s reserve fund (in the financials) keeps shrinking, that means there are likely assessments in increases in maintenance on the way. Â But the problem is when the market gets hot, no one seems to care anymore. Â I can't tell you how many deals clients have entered into, even though the financials don't look great. Â I also can't tell you how many times brokers have simply shrugged when I told them I can't get the proper info I need from the management company for the co-op. Â This information is so crucial and yet so discounted when everyone gets into a buying frenzy.Â
Imagine a situation where you buy a co-op for $500,000.00 because your budget allows for that. Â But it doesn't allow for much more. Â You're super excited because after months and months of looking, you've finally found a place you can afford AND that has a window that faces the water (in your dreams). Â Anyway, you've put together the numbers and you can just get by with the mortgage payment as well as maintenace. Â Now imagine the co-op doesn't have great board minutes and their financials show that their reserve fund is shrinking. Â No mention of repairs needed. Â When your lawyer asks the broker and the management company about this, he gets the same "shrug." Â "Look, pal, you either want this place or you don't. Â I have 6 other offers on this. Â The market is hot." Â Your temptation, as a buyer, would be to purchase. Â But that's the wrong move. Â If the co-op is not willing to disclose the appropriate documents, or, more likely, if those documents don't allow you to decipher whether or not this is a building that is sound financially (where you wont have to pay assessment after assessment every year), then you may want to move on. Â Again, when the market gets hot like this, people's behavior tends to change. Â They become more impulsive. Â If that happens to you, take a deep breadth, and step back. Â The financials of the building where you see yourself living for years and years are more important than your desire to get a deal now! Â Make sure you're able to figure out what it is you're getting into. Â Because you can't divorce a co-op. Â